Stocks came off their highs on a surprising announcement from Arch Coal midday that their earnings would be below expectations at $2.00-$2.50 a share (ests. $2.42). It was a reminder that earnings are coming.

What's up with commodity prices? Copper, gold, oil all moving up again. Goldman Sachs raises aluminum price estimates on strong Chinese demand during 2008 (somewhat offset by a contraction in aluminum consumption in the U.S., Japan and Europe, they say), combined with supply constraints in China and South Africa. Massey raises estimates for how much it can charge for coal. Morgan Stanley raised estimates for prices on hot rolled steel.

The upshot? New highs for many commodity stocks. Now if Alcoa would give positive comments after the close--but expect them to bitterly complain about high energy prices.

1) WM dropped precipitously on Friday near the close, so this story came at the right time;

2) If this happens it happened with no government intervention;

3) Throw this news together with the news that National City has buyers sniffing around, and the feeling is if WM and NCC can get through it, maybe the worst is over. The longer we go without another failure (even if there is another one), the calmer the sentiment will be;

4) Everybody sat out the second quarter (lots of cash on the sidelines).

5) Investors appear to be looking ahead to increase earnings in late 2009 or 2010.

Three reasons bears think this is nonsense:

1) It's not even announced yet! Plus its 100 percent dilution at 50 percent discount!;

2) Earnings will not be so great and the market will pull back in the next 2 weeks;

Also helping the banks: Merrill is upgrading UBS . Separately, UBS says it will respond to activist shareholders Olivant Advisors "in due course." Olivant owns an 0.7 percent stake in UBS and recently called for a restructuring of the company. Calls for an outright breakup have been getting louder recently.

In the endless merger dept: the FT reports that Delta and Northwest are once again revving up their merger discussions, despite the fact that the pilots could not even agree on the seniority levels of a merged company. This time, the two companies may take a run at each other without the pilot's approval.

What's up with China? Shanghai up another 4 percent after similar gains on Friday, Hong Kong has been bouncing for the past two weeks. Maybe it's the commodity "reflation" play again--gold, copper, oil all have been rallying.

The market bottom so far has been March 17, the first trading day of the Bear Stearns buyout. This will give added weight to those who are arguing that the Fed has indeed effectively created a floor for the market through its assistance in the Bear Stearns buyout and its action to provide liquidity to the market.

Another important point: financials have led the gains this week, though there were also substantial gains in tech, energy and materials, as well as builders (up 8 percent with many at 7 month highs), retailers, and REITS.

Be careful of complacency here, since earnings for a lot of big financial names are coming the week of April 14th. Expect writedowns and cautious commentary, but how big will the writedowns be? JP Morgan this morning said writedowns for the first quarter will be lower than for the fourth quarter.

The March jobs report (and the downward revisions in February) was a bit worse than expected, which is a disappointment for stock traders.

Let's be clear: stock traders want signs of stability and bottoming in economic statistics. They DO NOT want weak numbers on the theory that the Fed will continue to cut rates. They will gladly trade less rate cuts for an improving economy.

The dollar was down on the jobs report, dashing hopes for a dollar rally this week.

The real disappointment today is among those looking for a bottom in financials. This week is the best opportunity we have had to break long-term downtrends in stocks like Goldman Sachs , Lehman ,Citigroup , Wachovia , and many others. Traders have been itching to buy them recently; if they close on the upside despite this news it will be a significant victory for bulls.

Elsewhere:

1) British Air said there has been a 5 percent fall in business class passengers in March, acknowledging that slower economic conditions is beginning to affect their core business passenger business (first and business class passengers are about 60 percent of their profits).

2) Fertilizer company Mosaic reported earnings well above expectations. Strong demand for food and ethanol have driven prices for Mosaic's phosphate business up dramatically; despite the price increases, net sales in the phosphate business were up 82 percent on big increases in selling prices. They're also expanding their potash business. Raw material costs (sulfur and ammonia) were up significantly. Most important of all: two-thirds of their business is outside the U.S. (Note: Cargill owns the majority of the company).

First, the Street yawned at the two main news stories of the day. Despite a marathon, 5-hour Congressional session inquiring into the origin of the Bear Stearns mess, and a new series of proposals from the Senate to address the housing crisis, the net effect on the stock market was... nothing.

Nothing, because:

1) while many on the Street are interested in who knew what and when with Bear, this is backward-looking information and will not move the markets, and

2) the Senate proposals do little to address the fundamental problems of the housing market, i.e., funds for downpayments (which have increased), difficult underwriting standards, and buyers who are understandably hesitant to purchase a home that may fall in value.

Traders felt that most of the proposals being floated, including one that would give a $7,000 tax credit for people buying new homes or properties in foreclosure, would not be large enough to make a significant impact.

What did move the markets was an interview Merrill Lynch's CEO gave to a Japanese newspaper, where he said that he did not need to raise more capital. That moved up Merrill up 1.7 percent, as well as other financials.

There was little volatility; and as to volume? This was the lightest day of the year.

That's the bad news. Now let me give you the good news: Stocks have held the big gains on Tuesday for the second day in a row, even if they did drift lower into the close. Given that "Sell The Rally" is still the mantra, that is BIG NEWS.

Now we have to break out. This is the best opportunity since October for financial stocks to break out of the downtrend they have been in. That's why the Merrill news is a positive. We have a chance to begin changing the mindset. This is a critical moment for financials.

So we have yet another plan to help save homeowners in trouble, the latest in a long string of proposals. Are they enough to solve the housing market's problems? Is this a game changer? There's plenty of skeptics who think the answer is an outright no.

Ivy Zellman, who has been a homebuilding analyst for all 18 years I have been at CNBC, put out a note to her clients this morning saying the Senate proposals were "More Talk Than Substance." While her concerns are primarily with the homebuilding industry, her point is that there are still significant headwinds ahead for the industry before it burns through old land and begins creating economic value.

The biggest problem right now, she and others point out, is that homeowners don't have available funds for downpayments (which have increased), underwriting standards have become much more stringent, and buyers are understandably hesitant to purchase a home that may fall in value.

The plan under discussion does not address this central problem, so it will be difficult to have an impact on demand short-term. What will matter? Lower interest rates, for a start, which will help the reset problem, but that is not something that can be legislated.

These problems will continue to put pressure on pricing (even more than we have seen). The good news is that banks are now all over the builders, so they have begun selling at significant discounts. Centex , for example, was selling some assets at 16 cents on the dollar. This is painful, but part of the bottoming process. And there are buyers sniffing around: Blackstone this week raised a record $10.9 billion to invest in property in the U.S.

There's also a question of whether the plan would really accomplish much. It seems like a lot of action, but it may not amount to much. The plan would:

--Give local governments $4 billion in grants to buy and refurbish foreclosed properties (concern: not clear how much of a difference this will make. Estimates are that this will allow them to buy 20,000 homes, assuming a $200,000 average price, but Moodys.com estimates that 870,000 homes were lost to foreclosure in 2007, another 1.3 million will be lost in 2008;

--Give a $7,000 tax credit for people buying new homes or properties in foreclosure (concern: doubtful if this is large enough to make a significant impact on demand);

--Permanently increase the FHA loan limit to a maximum of $550,000 in high cost areas, but would also increase the down payment requirement from buyers seeking FHA mortgages to 3.5 percent from 3.0 percent (concern: there were discussions involving reducing the down payment, and while raising the downpayment requirement may be prudent as a policy move, the lack of cash for downpayment is a major problem, and this only exacerbates that. There is also significant debate among traders that the FHA is now becoming the new subprime product, but backed by the U.S. government, leaving significant exposure to taxpayers. Oddly, the much-discussed idea to have the FHA guarantee about $400 b of refinanced loans is not included in the plan).

One things' for sure: all this talk of incentives for home owners in foreclosure has at least put a floor under the home building stocks, which are among the better performers in recent weeks (up about 25 percent vs. a 6 percent gain for the S&P 500 in the last three weeks).

What it hasn't done is improve any of the fundamentals, at least not yet. Zellman's conclusion: "Given the recent strength in the group, we would recommend investors take profits at these levels."

Merrill moving up on reports in a Japanese newspaper that CEO John Thain has said he would not need to raise more capital. This has lifted financial stocks like JP Morgan and Citi, which has in turn raised the Dow.

So, if you are wondering what effect the hearings are having on the markets, the answer is, not much.

The dollar has been on a see-saw all day, rallying overnight on concerns over more writedowns of European banks, than dropping on the poor initial jobless claims report, than rallying somewhat on the ISM services report.

About Trader Talk with Bob Pisani

Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.